One of the most frequent questions we have received from our tenant-side clients since COVID-19 reached pandemic status is whether or not the application of a force majeure clause will benefit a tenant that is struggling economically due to these unexpected circumstances. Commonly, the force majeure clause in a lease defines specific events and then includes broad “catch-all” language, such as “and other causes beyond the reasonable control of the party obligated to perform.”
It should be noted that the more specific the clause, the more limited application it will have since the actual event which occurs is less likely to be on a specific list as opposed to one that is more general in nature. However, there are some instances where these specific lists include “pandemic” or “epidemic”.
With respect to COVID-19, it is more likely than not that even a broad force majeure clause language would apply since the virus was declared a pandemic on March 11. This is more likely given the government imposed travel bans and quarantines. It would be unlikely that any court would decide that a tenant caused the virus, thus negating the applicability of the force majeure clause.
Finally, one provision that is contained in most force majeure leases clauses, to the detriment of tenants, sets forth that the force majeure clause does not excuse the tenant’s obligation to pay rent and other charges under the lease. The intention of the parties appears to be that a tenant may be excused by a force majeure of complying with a continuous operation clause in the event of a pandemic, but the tenant still must pay rent. Based upon the current pandemic and unique economic situation both landlords and tenants are in due to the virus, a tenant might try to make an argument that the obligation to pay rent clause during a force majeure event is unconscionable and against public policy. At the end of the day, however, the specific language of the lease will govern agreement between the landlord and tenant. That being said, nothing precludes a tenant and landlord from coming to a mutual agreement to weather this storm.
Please feel free to reach out to discuss your specific situation further and ask any other questions you may have with respect to your lease.
